[Global Focus] The Vanished 4,600 Trillion... The Automobile Empire Also Bids Farewell to Oil

Ford Foundation Halts Oil Investments... 1,500 Institutions Turned Away This Year
Once World's Largest by Market Cap ExxonMobil Now at Half Its Peak
Activist Funds Take 25% of Board Seats, First Annual Loss in 40 Years
Large Profit in Q3 After a Long Time... Interest in Green Investments

[Asia Economy Reporter Byunghee Park] The Ford Foundation, established in 1936 by 'Car King' Henry Ford (1863?1947), declared last month on the 18th (local time) that it would cease investments in fossil fuels. This held significant symbolic meaning, given Ford's role as a key figure who ushered in the oil era of the 20th century. Until the late 19th century, oil was mainly used as fuel for lighting, but it faced a crisis when Thomas Edison (1847?1931) invented the electric light in 1879. Thanks to Ford's invention of the automobile, the oil market revived.

The Ford Foundation's assets amount to $16 billion. It boasts one of the largest scales among private foundations operated by specific families. Harvard University's endowment fund, representing the Ivy League, also declared on September 10th that it would stop investing in fossil fuels. Harvard's endowment fund is the largest university fund, totaling $42 billion.

This year, institutional investors declaring an end to fossil fuel investments are emerging one after another. DivestInvest, a nonprofit organization researching eco-friendly policies, revealed in a report released on the 26th of last month that about 1,500 institutional investors have declared divestment from fossil fuels, amounting to $39.2 trillion (approximately 46,020 trillion KRW). When DivestInvest began compiling related statistics in 2014, there were only 181 institutions with $52 billion.

Amid the COVID-19 era, the trend toward decarbonization and eco-friendliness is accelerating. As ESG (Environmental, Social, and Governance) investing becomes a hot topic, oil companies that led the oil era are facing unprecedented pressure from shareholders.

Eco-friendly Investments Pressuring Major US and European Oil Companies

On the 27th of last month, US hedge fund Third Point demanded the breakup of Royal Dutch Shell, Europe's largest oil company. Third Point argued that Shell should be split into a company operating the existing oil refining business and another company responsible for new businesses requiring investment, such as renewable energy. They claimed that as eco-friendly investing becomes mainstream, Shell is being shunned by investors, and splitting the company would attract investment.

Shell is also under pressure from environmental groups. In May, Shell lost a lawsuit filed by the environmental nonprofit Friends of the Earth. Friends of the Earth sued Shell, arguing that its production of oil and natural gas causes climate change and violates Shell's own obligations to protect human rights. The District Court in The Hague, Netherlands, ruled in favor of Friends of the Earth, ordering Shell to reduce its greenhouse gas emissions by 45% by 2030 compared to 2019 levels. This is more than double Shell's own target of a 20% reduction by 2030.

Possibly influenced by this ruling, Shell sold its subsidiary Permian Basin Holdings, which holds drilling rights in Texas oil fields, to US oil company ConocoPhillips for $95 million in September. Permian Basin holds drilling rights covering 225,000 acres (about 910 km²) in the western Texas region, the largest oil field in the US.

US's largest oil company ExxonMobil also conceded three of its 12 board seats to the eco-activist fund Engine No. 1. Engine No. 1 holds only 0.02% of ExxonMobil's shares. However, Engine No. 1 created a miracle by toppling a giant like David defeating Goliath, championing eco-friendly investment. Engine No. 1 advocated for green investments and garnered support from BlackRock, the world's largest asset manager holding 6.68% of ExxonMobil shares, and major US pension funds. Larry Fink, chairman of BlackRock, announced in his annual letter early last year that the firm would reduce investments in fossil fuel companies.

‘Seven Sisters’ and ‘Top Market Cap’ ? All Things of the Past

ExxonMobil CEO Darren Woods reportedly met with Mike Wirth, CEO of the US's second-largest oil company, at the end of last year to discuss a possible merger. The Wall Street Journal (WSJ) mentioned Standard Oil in its report on the merger talks. Standard Oil, founded by Rockefeller, controlled 91% of the US oil market until the early 20th century. It was broken up into 34 companies in 1911 due to antitrust laws. Both ExxonMobil and Chevron originally trace their roots back to Standard Oil.

Even after its breakup, Standard Oil exerted strong influence in the international oil market. Until the mid-1970s, before the Organization of the Petroleum Exporting Countries (OPEC) gained significant power, Standard Oil, along with Royal Dutch Shell and Anglo-Iranian Oil (the predecessor of British Petroleum, BP), were known as the 'Seven Sisters,' dominating the global oil market.

The oil majors, once forcibly separated due to their overwhelming influence, have now shrunk so much that they are considering reuniting.

ExxonMobil was the US's top company by market capitalization for a long time until the emergence of Microsoft and Apple. Until 2013, it competed with Apple for the top market cap spot. At that time, its market cap exceeded $400 billion and was approaching $500 billion. However, ExxonMobil's current market cap is only $270 billion. Even combined with Chevron ($220 billion), it does not exceed $500 billion.

ExxonMobil recorded losses in all four quarters last year, marking its first annual deficit in at least 40 years. Fortunately, with recent rises in oil and natural gas prices, ExxonMobil posted a net profit of $6.8 billion in the third quarter this year, its highest since 2017. Chevron also reported its highest net profit since 2013, at $6 billion. The Wall Street Journal expressed curiosity about how oil companies will use these rare large profits, noting that US oil companies have not made diversified investments in eco-friendly energy compared to their European competitors.

This content was produced with the assistance of AI translation services.